October 21, 1999
Dear Shareholders:
During the third quarter of 1999, we made two new investments. We invested
$300,000 in G-TEC Natural Gas Systems. The company manufactures and distributes
patented systems that allow natural gas to be used as an alternative to fuel
gases such as acetylene, propane, propylene and MAPP gas. Typically, these gases
are used in cutting, brazing, and heating of metals and are used by steel
distributors, metal fabricators, scrapyards and automobile repair shops. G-TEC
delivers a cheaper alternative as well as a safer, cleaner, and more convenient
solution for industrial consumers. We also invested $100,000 in MemberWare
Technologies, Inc. They are a provider of Internet, Intranet, electronic
commerce and document management solutions for trade associations. They have
introduced AssociationCentral.com, an on-line portal that provides web users
with information, products and services provided by trade associations.
Two of our investments were liquidated during the quarter. We sold our
investment in Lightbridge, Inc. at a small profit and we were repaid by
HealthWay Products, Inc. Our investment in HealthWay during the past three years
produced a 24% annual return.
We have revalued several companies. Our valuation for Pathlight Technology,
Inc. was increased by $185,000 to reflect the completion of the company's recent
equity financings. Additionally, we have adjusted our valuations of MINRAD, Inc.
and BioVector, Inc. to reflect the values of an anticipated equity financing.
During the quarter, we also wrote-off our investment in Reflection Technology,
as the company has ceased operations.
The net result of these adjustments was to decrease our Net Asset Value
from $1.42 to $1.33.
Thank you for your support.
Allen F. Grum
President
<PAGE>
Portfolio Valuation / June 30, 1999
<TABLE>
<CAPTION>
September 30, 1999 June 30, 1999
Per Per
Company and Business Type of Investment Date Acquired share share
- -------------------- ------------------ ------------- Cost Value of Rand Value of Rand
---- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
American Tactile Corporation Convertible 6/23/95 150,000 50,000 0.01 50,000 0.01
Medina, NY. Develops Debentures at 8%
equipment and systems due June 2000
to produce signage. and April 2001 with
www.americantactile.com detachable warrants
ARIA Wireless Systems, Inc. Common Stock - 5/23/97 438,000 172,000 0.03 122,000 0.02
(OTC:AWSI)* 488,000 shares
Buffalo, NY. Markets wireless $50,000 Demand Note
radio transmission at 15%
communication equipment.
www.ariawireless.com
BioVector, Inc. Common Stock - 4/17/97 445,030 370,000 0.06 520,030 0.09
Buffalo, NY. 125,000 shares
Medical technological sales Preferred Stock -
force company. 225,000
BioWorks, Inc. Series A 11/6/95 56,000 56,000 0.01 56,000 0.01
Geneva, NY. Develops and Convertible
manufactures Preferred Stock -
biological alternative to 32,000 shares
chemical pesticides.
www.bioworksbiocontrol.com
Clearview Cable TV, Inc. Common Stock - 400 2/23/96 55,541 55,541 0.01 55,541 0.01
New Providence, NJ. Cable shares
television operator.
DataView, LLC 4.7% Membership 10/1/98 200,000 200,000 0.04 200,000 0.04
Mt. Kisco, NY. Designs, Interest
develops and markets
browser based software for
investment professionals.
www.dataviewllc.com/marketgauge/
Ellicottville Energy, Inc. Note at 9.3%, due 6/29/99 145,000 145,000 0.03 145,000 0.03
Ellicottville, NY. June 29, 2000
Cogeneration facility selling
electricity to a regional
utility.
Fertility Acoustics, Inc. Common Stock 10/1/97 50,000 125,000 0.02 125,000 0.02
Buffalo, NY. Developer of -600,000 shares
proprietary Option to purchase
methods to diagnose onset of 180,000 shares
ovulation.
G-TEC Natural Gas Systems 41.67% Class A 8/31/99 300,000 300,000 0.05
Buffalo, NY. Manufacturers and Membership Interest
distributes systems that allow
natural gas to be used as an
alternative fuel to gases.
www.gas-tec.com
<PAGE>
Hammertime, Inc. Convertible 10/1/98 300,000 300,000 0.05 300,000 0.04
Clarence, NY. Exclusive Sears Preferred Stock -
licensed installer 1,000 Shares
of kitchens and baths. Senior Subordinated
Note at 12% due
October 2000
Promissory Note at
15%, due August 1999
HealthWay Products Company, Common Stock -1,000 3/18/96 100,100 100 0.00 100,100 0.02
Inc. shares
Syracuse, NY. Manufactures air 4,667 warrants for
filters and Series A Preferred
climate control devices. Stock
www.healthway.com
InfoMiners.com Bridge loan at 10% 12/21/98 420,000 420,000 0.07 420,000 0.07
Amherst, NY. Data warehousing due June 1999
and decision 147,000 warrants
support software for for shares of stock
healthcare industries.
www.infominers.com
Lightbridge, Inc. Common Stock - 3/31/94 109,439 -0- 0.00 73,307 0.01
(NASDAQ:LTBG)* 5,843 shares sold
Burlington, MA. Provides August 1999
software based services
for wireless
telecommunications industry.
www.lightbridge.com
MemberWare Technologies, Inc. Promissory Note at 9/16/99 100,000 100,000 0.02
Pittsford, NY. Internet Prime Rate + 4.5%
company engaged in web related due September 2004
consulting services. Common Stock -
www.memberware.com 40,000 Shares
MINRAD, Inc. Common Stock - 8/4/97 429,000 741,000 0.13 949,512 0.17
Buffalo, NY. Developer of 118,689 shares
laser guided surgical devices.
Pathlight Technology, Inc. Class A Series 10/7/97 425,000 610,000 0.11 425,000 0.07
Ithaca, NY. Develops high Convertible
technology Serial Preferred
Storage Architecture for Stock - 200,000
computer industry. shares with 6%
www.pathlight.com cumulative
dividend.
Preferred Class B -
117,187 shares
67,578 warrants for
shares of stock
Platform Technology Holdings, Two units with 9/24/97 8,045 60,000 0.01 60,000 0.01
LLC option for two
Charlottesville, VA. Provides additional units
sales support and
management for unique medical
businesses.
Reflection Technology, Inc. Series J 10/4/95 500,000 -0- 0.00 150,000 0.02
Waltham, MA. Develops and Convertible
licenses proprietary Preferred Stock -
virtual display technology. 243,903 shares
www.reflectiontech.com
<PAGE>
UStec, Inc. Promissory Note at 12/17/98 100,000 100,000 0.02 100,000 0.02
Victor, NY. Manufacturers and 12% due December
markets digital wiring 2003
systems for residential new 50,000 warrants for
home construction. common shares
www.ustecnet.com
Preferred Stock Portfolio Merrill Lynch - 7/15/99 1,047,888 987,350 0.17
Merrill Lynch (MER-F), 12,000 shares;
Motorola (MOT-A), Citicorp Motorola - 10,000
(CIH-A), Texaco (TXC-A) shares; Citicorp -
10,000 shares;
Texaco - 12,000
shares
Other investments Other 471,296 1,724 0.00 62 0.00
TOTAL PORTFOLIO 5,690,900 4,793,715 0.84 3,850,552 0.68
investments =========
Cash and Cash 1,657,362 0.29 3,076,444 0.54
equivalents
NET 91,797 0.01 79,078 0.01
receivables(payables) ------ ------
Net Assets before 6,542,873 1.14 7,000,074 1.23
Taxes
TAX PROVISION (1,071,880) (0.19) (1,071,880) (0.19)
(benefit) ----------- -----------
NET ASSETS 7,614,753 8,077,954
========= =========
Net Asset Value per 1.33 1.42
Share (5,708,034
shares outstanding
during both periods)
</TABLE>
* Publicly owned company ^ Unrestricted securities as defined in Note (a)
Note: Restricted securities, including securities of publicly-owned companies
which are subject to restrictions on resale, are valued at fair value as
determined by the Board of Directors. Fair value is considered to be the amount
which the Corporation may reasonably expect to receive for portfolio securities
if such securities were sold on the valuation date. Valuations as of any
particular date, however, are not necessarily indicative of amounts which may
ultimately be realized as a result of future sales or other dispositions of
securities. Among the factors considered by the Board of Directors in
determining the fair value of restricted securities are the financial condition
and operating results, projected operations, and other analytical data relating
to the investment. Also considered are the market prices for unrestricted
securities of the same class (if applicable) and other matters which may have an
impact on the value of the portfolio company.
<PAGE>
Rand Capital Corporation
Board of Directors (Elected by Shareholders April 27, 1999)
Reginald B. Newman II Chairman of the Board
Allen F. Grum
a, c Luiz F. Kahl
g Erland E. Kailbourne
c, g Ross B. Kenzie
a Willis S. McLeese
a, c, g Jayne K. Rand
a - Member of audit committee
c - Member of compensation committee
g - Member of governance committee
<TABLE>
<CAPTION>
Officers Title Email
- -------- ----- ----
<S> <C> <C>
Allen F. Grum President, Chief Executive Officer [email protected]
Nora B. Sullivan Executive Vice President [email protected]
Daniel P. Penberthy Chief Financial Officer [email protected]
</TABLE>
Corporate Data
Stock Listing NASDAQ SmallCap Market - symbol RAND
Transfer Agent and Registrar Continental Stock Transfer & Trust Company
General Counsel Hodgson, Russ, Andrews, Woods & Goodyear, LLP
Independent Accountants Deloitte & Touche LLP
Number of Shareholders 786 (as of March 15, 1999)
Rand is actively seeking business opportunities for investment
consideration. If you are aware of such businesses which may need Rand's support
and assistance, please feel free to contact us. Rand Capital Corporation 2200
Rand Building
Buffalo, NY 14203
Tel: 716-853-0802
Fax: 716-854-8480
